Senate moves on minimum wage

Posted: Wednesday, January 31, 2007

WASHINGTON - The Senate cleared the way for an increase in the minimum wage Tuesday, but only with business tax breaks that House Democrats want removed.

Final Senate passage of the legislation is expected later this week, setting the stage for a round of difficult negotiations between House and Senate Democrats over how to get the legislation to President Bush for his signature.

In a key test, the Senate voted 87-10 to end debate on the bill Tuesday, well clear of the 60 votes needed.

Earlier this month, the House passed the same increase in the wage floor - from $5.15 to $7.25 an hour over two years - without any tax provisions. Senate Democrats tried to push through the House version last week, but failed to get the 60 votes to end debate.

The vote Tuesday emphasized how Senate passage of the bill depends on the tax package to attract Republican votes. The White House has also signaled that Bush wants tax breaks in the legislation.

"Raising the minimum wage will cost some jobs," Al Hubbard, the director of the president's National Economic Council told reporters aboard Air Force One Tuesday. "We think it's important to counter that with tax breaks that will replace those jobs."

"The Senate has recognized that our economy is interdependent," said Sen. Michael Enzi, R-Wyo. "One simply cannot claim credit to be helping workers at the same time that they're hurting the businesses that employ them."

The tax breaks in the Senate bill have divided the private sector, pitting small businesses and retailers that would benefit from them against the larger corporations and manufacturers that would have to pay for them. The package costs $8.3 billion in lost tax revenue over 10 years.

To help pay for the tax breaks, corporations no longer would be able to deduct the cost of jury verdicts or settlements in liability suits against them and their executives' tax-deferred pay packages would be capped at $1 million a year.

The bill's business critics are especially annoyed that the tax benefits would be short-term while the provisions that pay for them would alter tax law for the long-term.

The bill would extend tax breaks that allow small businesses to deduct up to $112,000 in new investments a year. It also would reduce the depreciation period for improvements to retail properties and extend a tax credit for businesses that hire low-income or disadvantaged workers.